How Free Apps Make Money? | Monetization Strategy, Tools & Trends
Ever wondered how free apps make money? There are certain monetization strategies aimed at helping an app earn revenue after the user has downloaded the app for free from the App Store or Google Play Store.
The developers of free mobile applications earn revenue from other sources. So, if you’re an entrepreneur looking to launch a free app and earn revenue from it, this article is specifically for you.
Today, I will explain “how do free apps make money “ and the monetization strategies you can use to make money from free apps.
I’ll also unveil the great tools that you can use to boost your free app revenue. In a nutshell, this article is your complete guide to building a revenue-generating strategy for your free app. So, without any further ado — let’s get started with the monetization strategies.
- In-app advertising.
- In-app purchases.
- Sponsorship Model.
- Subscription Model.
- Referral Marketing.
- eCommerce/Merchandise selling.
- Email Marketing.
8 Best App Monetization Strategies For Free Apps
We’ve already listed the monetization methods above that you can follow to make money off your app, here we’re going to explain their usage in-depth. Know that there is not a pre-defined or ideal way to make money from an app. You can follow the method that best suits your app’s business model.
We would recommend setting up revenue streams to determine the various sources from where your app could earn money. By identifying different opportunities in your domain, you can select the best monetization method for your free app.
Also, you can consider the statistical data that you can find anywhere on the internet. For example, 89% of the mobile publishers used video ads to monetize their mobile content. In-app purchases were second on the list with a 68% implementation ratio. The data mentioned above tells us that video ads are considered the most viable option for making money from apps.
Moreover, the strategy, approach, or method depends on your app’s business model so, take time in choosing the best monetization method. Now let’s take a closer look at the monetization methods for mobile applications:
2. In-App Advertising
In-app advertising is one of the best mediums that you can use to make money with your app. You can charge a fee for allowing businesses to run their ads within your free mobile app. However, you need to increase your user base to get businesses to advertise their product or service in your app. The more users you have, the more you’ll earn revenue from your free app.
Moreover, here are five different ad formats to utilize in a mobile app:
These ads are placed at the top or the bottom of the app’s screen. They generally don’t block the user’s view so that they can keep using the app normally. However, these ads have a low click-through ratio, and they’re dependent on brand recognition.
Video ads are probably the best and widely used method of monetization within your free app. This ad format can generate immense ROI for any brand. However, the message needs to be clear, effective, and meaningful. A simple 10–30 second video is placed in an app. The app naturally pauses when the video starts playing.
However, to get the user into watching the video intentionally, you would need to incorporate an emotional pull or offer some perks or benefits of watching the video.
Although native ads are essential for promoting a specific brand, product, or service through videos or content, they can be irritating or tiresome.
These ads show up in the form of a page whenever the user opens the app. These ads give the user the option to either close the ad or complete the buyer’s journey to convert.
Incentivized ads are perhaps the best type of advertisement on this list. These ads focus on providing the users with a reward for completing a specific action.
Considering the fact that users hate advertisings because it halts their experience, these ads are the ones that your audience will click on intentionally because they know that they’ll get something in return.
3. In-app purchases
In-app purchases are yet another popular monetization strategy that free apps use to earn revenue. Using this medium, developers incorporate virtual items in an app that the users are supposed to buy.
For examples; the in-app purchases of gaming apps include the following virtual items:
This monetization model is viable when you have a strong user base to get more purchases plus, the transaction within an app can be paid through credit or debit cards.
Want to learn what goes into making a robust and performance-packed mobile game? This article will blow your mind with the details of building a mobile app: “ How To Make A Mobile Game.”
Moreover, in-app purchases are generally divided into three categories:
- Consumable: these are the digital items that the users use up. They are mostly found in games, i.e., bonuses or credits.
- Non-consumable: these are the permanent features. For example, ad-blocking, item upgrades, or lifetime usage.
- Subscriptions: these are the features that users by to unlock advanced functionalities or features of an app. Subscriptions can be monthly or annually. A great example of such an in-app purchase can be Netflix.
4. Sponsorship Monetization Model
The sponsorship monetization model is the best if you want to make money from an app. However, this model is perfect for apps that already have a robust user base.
So, if you want to go for this monetization model, you need to contact sponsors working in the same industry to get information regarding ads.
You can follow the two sponsorship deals:
- Divide revenue earned from the app.
- Set a monthly sponsorship fee.
5. Subscription Monetization Model
The subscription model sets up revenue streams to charge weekly, monthly or annual fees for a particular service from the free app. This monetization method is best if your app belongs to the entertainment genre, I.e., music, video, or other forms of content.
The users can select a subscription plan according to their requirements and pay a specific amount to subscribe to the chosen subscription plan.
However, the subscription model requires constant app maintenance, updation, effective content strategies, and more to stay on par with the competition and guarantee high-level or services and user experience.
6. Referral Marketing
The referral marketing revenue model is based on CPA (Cost per action). Referral Marketing is more like affiliate marketing, where you have to market the product of a company within your app. The more traffic clicks or installs the other company’s digital product gets because of your app, the more you’ll earn revenue in the form of commission.
Moreover, the referral marketing model involves the following methodologies:
- Promotional ads of other apps.
- In-app ads.
- Video ads of other products or services.
Additionally, numerous affiliate networking companies (Admob or Flurry) offer the service of finding a suitable affiliate product for your mobile application.
7. Crowdfunding Model
The crowdfunding model is new to the free app monetization list, and it is safe to say that this model is still in the development phase. This method can also be used to monetize a free app to earn revenue. Through the Crowdfunding model, you can raise investment for your mobile app development or marketing requirements. You can use the following platforms to be crowdfunded:
Furthermore, this monetization method is not viable because there are millions of applicants waiting to be crowdfunded. Therefore, the process of availing of this offer may be time-consuming, daunting, risky, and frustrating. However, one way to get crowdfunded is by showing your digital product’s value to the investors.
8. Email Marketing
Email marketing is perhaps the oldest yet still a super-result yielding method of earning revenue from your free mobile app. Email marketing, when done strategically, can be profitable.
This is the process of collecting data of relevant users of your application and sending them emails regarding your product to spark an interest in your audience.
The email that you’re sending can include a marketing pitch and marketing materials. This process also sparks your prospects’ interest in your mobile application by informing them about the new features, innovation, and functionality or usability that your mobile application is bringing to the digital world.
One primary concern that comes to mind while implementing the email marketing approach is “Where should we get the emails”? So, here are a few ways through which you can get the emails of your preferred audience:
- Ask for the user’s email in exchange for valuable rewards or coins within the app.
- Use the “Sign-In with Gmail” feature to collect the user’s email.
- Use third-party tools to collect emails.
Additionally, you can ask for permission to acquire the email or personal data of the user. This is a high priority of your app operating in Europe due to the GDPR policy.
9. eCommerce Mobile Application
Although an eCommerce mobile application would cost you more than a general mobile application, it would result in more revenue and sales in the long run.
Considering the fact that the eCommerce industry is booming, having an eCommerce app would be innovative and hassle-free for the users. The users would seamlessly open your app, place their order, pay the price and wait for their order to arrive.
Therefore, your free app would be earning high revenue via this monetization model. A great example of this revenue model is the eBay app, as it is a free app, yet it earned $9.62 billion in 2020 by selling branded items.
Furthermore, although this monetization model is best for earning revenue from your free mobile app, it demands a large audience to earn revenue.
Tekrevol’s expertise is highly competitive when it comes to building eCommerce mobile applications. So, if you’re looking to get an eCommerce app built to earn money, just click on the button below.
How To Ensure The Creation Of A Revenue Generating App?
To ensure a successful and performance-oriented monetization model to earn revenue from your free app, you need to implement a research and learning phase for your free mobile application.
Here are the four essential steps that you can implement to create the perfect free applications based on a robust app monetization model:
- Researching and Analyzing the market for competitive products.
- Understanding the concerns of the targeted audience.
- Creating an innovative concept for your mobile application.
- Building a revenue-centric app monetization strategy.
Let’s break the steps mentioned above into headings to explore further the strategic process of ensuring the money-making part of free apps.
1. Researching And Analyzing The Market
Searching and analyzing your free app’s target market will help you integrate the most in-demand features and aspects to your app currently missing in the market. After thoroughly analyzing the market, you can easily gain insights into what is currently trending in the market and what you need to do to make your mobile application super-successful.
Capitalizing on the opportunities will enable you to fill the gaps left by the competitors. This, in the long term, would ensure that your mobile application is providing value to the customers hence, improving its user base, performance, and user-friendliness.
2. Understanding The Concerns Of The Targeted Audience
Understanding the audience is another imperative stage that will ensure the effectiveness and viability of your mobile application.
To nail this part like a professional, we recommend you go through deep market research. Extract and streamline all the relevant details of what your audience is expecting from a mobile application.
Once you’re done with understanding your targeted audience, you can easily start prototyping your application. After thoroughly understanding the concerns of your audience, you’ll get to know what inspires your audience and what irritates them.
Some of the best aspects that you’ll learn while opting for understanding the concerns of your audience are the following:’
- You’ll create a memorable app name.
- You’ll integrate more brand and primary objective-focused visuals.
- You’ll integrate the most desired set of features and functionalities that your audience needs.
- The overall app will be feature-packed rather than being feature stuffed.
3. Ensuring An Innovative Concept For Your Mobile Application
How many times have you thought of an innovative business concept, and later you came across a pretty similar business model over the internet? Well, this happens because the digital sphere is growing as we speak.
There are new websites, applications, business models, and other types of digital products being launched now and then, which has shortened the possibility of ensuring innovation.
So, what can you do to ensure innovation? The best way to ensure it is by investing more time in idea generation or solving a specific audience’s particular problem in a never-before-seen or observed way.
This would enable you to brainstorm different ideas of deliverance or problem solving around your product or services.
4. Build An App Monetization Strategy
If you want to earn money through your free app, then an app monetization strategy is the most critical aspect of your overall app development venture.
For starters, you can research and analyze the applications in the market (mostly competitors). See what they’re doing with their applications, the USPs of these applications, and what type of monetization strategies they are using.
Want to learn further the ins and outs of developing an app, in other words, a revenue-generating machine? Check out this great article, “ WANT TO CREATE THE NEXT MILLION DOLLAR APP? HERE’S HOW YOU CAN DO IT!.”
The Best Monetization Tools For Your Free App?
Now that you’re familiar with the best practices of creating free mobile applications equipped with the power to go beyond. Let’s tell you about the list of tools that can help you with your free app monetization strategy:
Google created Admob, and with the integration of this great monetization tool to your mobile application, you can generate revenue by showing your users ads.
Facebook’s Audience Network
The social giant has struck again, and this time, it has come up with a monetization tool that accurately targets the users to show them what they’re in search of.
Apple has also stepped into the fray of helping businesses (app’s primarily) with monetization and exposure in the digital world.
Amazon’s Mobile Ad Network
Another tech giant that enables your app to earn revenue per impression. This method is generally known as the ‘cost per impressions’ model, where Amazon pays to your app as per the impressions it is getting.
This tool comes with analytic predictions for the market through which you analyze the peak performance of the top brands. Tapjoy also makes it easier for advertisers to connect with accurately targeted audiences.
Although the tools mentioned above are some of the best monetization tools that you can use for your free app to make money, still, my recommendation would be to conduct in-depth research all by yourself.
Conducting this in-depth research will help you create a monetization strategy that will derive revenue from the value you’re offering and become a consistent method of generating revenue from your free app.
Determine which platforms will do wonders for your app in terms of generating revenue through monetization. Know that not all apps are similar, so if you’ve learned about a famous gaming app using Tapjoy for monetization, it doesn’t necessarily mean that you have to go for the same platform to earn revenue from your free app.
So, with the monetization tools for your free app out of the way — let’s start digging deep into the freemium model of app monetization.
Freemium Model of App Monetization
Freemium is generally a combination of two words, and I’m pretty sure as an entrepreneur you may have already guessed it — that’s right, “Free” and “Premium.”
This model is based on the approach of providing premium but free services to the users. However, the model still generates revenue by leveraging other methods of charing from the audience.
Take, for example, Dropbox, a popular and innovative cloud storage platform that offers a free plan for up to 2GB. The free plan also gives the user some basic features like backups and file sharing.
However, once the users have consumed the free data space given to them, they’re asked to upgrade to the pro-plan, offering a more extended functionality for $9.99/month.
Furthermore, what actually makes their approach different and sustainable is that the freemium model on which the whole revenue-generating idea of the free platform is based.
Dropbox allows the user to experience the platform for free seamlessly. Once the user is convinced of their services and features, they can upgrade to the pro-plan to increase usability and the feature stack.
What’s Trending In The World Of App Monetization?
In-app ads are still the dominant way through which your free app can earn money in 2021. However, the change observed in the in-app ads is super-related to the user experience.
Since delivering robust customer experience is becoming an integral part of any business in the digital world, the in-app ads are designed to boost customer experience and not bombard the user’s screens with irrelevant ads. This precise targeting and ad placement are what I think will define the success of your app monetization model.
Increasing Popularity Of The Freemium Model
With the ever-increasing usage of the digital world, the popularity of creating freemium apps to earn money has become more normalized than ever. There are literally millions of users searching for free apps that offer a great customer experience while solving a particular problem.
Such users are more likely to purchase an in-app feature or spend money to expand the application’s functionality further. Therefore, the freemium model is increasingly becoming an integral part of the overall tech-business world.
In-App Purchase Model Is Growing
The in-app purchases again make a list with their trending presence in the free app money-making list. And yet again, the focus has been shifted to user experience and engagement.
Keeping the customer experience and viable approach in mind, You can easily include the most intriguing aspect to your digital ads to ensure that your viewers/audience buys the item, product, or service featured within the ad.
Subscription Method Adoption
The subscription model of earning money through your free app is destined to grow in the future. Recently Apple, made this model available for all categories, and now the subscription model is not limited to media, music, or entertainment services. It has reached the cloud and beyond. Additionally, the subscription dashboard allows you to conduct data analysis. Hence, as an entrepreneur, you have the advantage here in terms of determining the best-selling ads incorporated within your apps.
Free Monetization Models In Evolving Markets
The monetization mentioned above models is designed for entrepreneurs who are willing to invest heavily into the developed markets to ensure high ROI.
In contrast, the free monetization models in emerging models relate to the market where the usage, purchasing power, and feature stack, although advance, are still limited. Here the average income is low but building a sustainable free app to make money is relatively easier.
The monetization models mentioned above are the emerging trends in the market. By capitalizing on the well-suited model for your mobile application, you can easily earn money through your free app. One recommendation from my side would be for you to consider creating a “crowdsources by-product model.”
Additionally, after learning about the functionality and feature stack, every entrepreneur may wonder how much would an app like this cost, right?
Don’t worry — we’ve got you covered as we just happen to have the right article for you written after thorough market research, analysis, and much more: “How Much Does It Cost To Make An App?”
Now, How To Really Make Money From Free Mobile Apps
Don’t get me wrong, but if you’re a business owner, you may have an idea of how hard it is to make money from not only free applications but also other businesses. Nowadays, especially when you’re operating in the digital world super-cluttered with businesses offering the same services as you’re.
The best advice, however, is to ensure that you’re delivering a robust and innovative product that is delivering a stand out customer experience and solving a particular problem like Uber, Duolingo,
Furthermore, a breakthrough app I’m sure you’re familiar with is WhatsApp. WhatsApp was launched in 2009. After gaining popularity and usability of epic proportions, the app caught the attention of the social giant in 2014 when Facebook stepped up and bought the app for $16 billion.
Today, WhatsApp is an app that has gained colossal popularity, and Mark Zuckerberg said that the free messenger has the same level of engagement as Facebook itself.
With 2 billion users, a sky-high engagement ratio, and extreme digital success, how does WhatsApp earns money?
I mean — it is a free app with no ads, no download fee, and certainly no in-app purchases. You don’t have to buy specific app features — the app comes free for Android and iOS users.
However, during the app’s initial success, the developers asked for $1 per download on iOS. Fast forward a few years, the developers were asking for $1 per year for every device. Even with such ambiguity, the innovative tool that made communication easier reach the above mentioned above.
Another free app that makes billions of dollars is Snapchat. The app got famous due to its standout aspect of making messages disappear and fostering a culture of chatting via snaps. This particular free app makes money through sponsored ads and premium filters mainly.
Due to a massive user base of 265 million, the app can enable brands to revolutionize their ROI, ensure sustainability through sales and conversions if the business model is unstable, and target massive audiences. However, this monetization model is loosely based on Facebook’s or Instagram’s model, where you can target a specific audience.
Additionally, Snap Inc — the company that owns Snapchat, generated $133 million in the 4 thquarter of 2020, a $67 million decrease in losses compared to the previous quarter in the respective year. Considering the stats, it is pretty much safe to say that the digital world is uncertain, and anything can happen.
Looking for details on developing a social media app? Here’s one of the best articles that have every bit of detail you need before getting started: “ How To Make A Social Media App? (The Complete Guide With Examples) “
A comparison of today’s digital world is very similar to the one that revolutionized everything — the one that several internet users and experts believed to be the golden era of the internet from 2004 to 2009. During this period, most of the startup Davids slew entrenched Goliaths by bringing something new to the table or leveraging the latest technologies to ideate, incubate, iterate, and scale, kind of like what Tekrevol does for its clients.
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Coming back to the point, despite the staggering losses in revenue over the years, Snapchat still has a net worth of $5 billion, and it is predicted to earn more money in the future.
Another great app that innovated the way we travel and think of transport “Uber” made its debut in 2011 in San Francisco, and since then, the app has revolutionized the way people travel. It has reinvented the approach of booking a ride anywhere in the country and made the overall experience seamless.
Honestly, I’d be including fluff here if I was to tell you anything about Uber that you don’t already know. However, this would be new to you that Uber generated a super super impressive revenue of $11.139 billion in 2020.
Quite frankly, I’m excited at the moment. I mean, mobile applications had come a long way from back in 1997 when Nokia released The Nokia 6110, which had a built-in game “Snake” that can be considered an app given that it had everything that a modern basic app today has.
I believe that the features, performance, aspects, and several technological elements do not determine the viability or success of the app. Although it should have features, I’m not advising that you launch a feature-less app.
However, it should significantly reflect a culture or myriad cultures, all languages, deliver robust experience, and connect with the audience in a meaningful way. And this, in my perspective, is what actually matters in the digital world — you build connections to convey powerful meanings to your audience.
So, there are many ways for you to earn money through a free app either you can ask your audience to pay for a service, or you can simply help them unlock the full functionality of the app by charging a specific amount to earn money from your free app.
Pro-tip: Make the overall proposal of your app unique and innovative so that the users feel as if they’re literally missing out on something super-important if they’re not buying from your free app.
Other than learning how free apps make money, we’ve got another great article that explains the fundamentals of how general apps based on general revenue models earn money written by one of our best business analysts. So, be sure to check “ How Apps Make Money.”
Wrapping It All Up
That was one hell of a ride, and together we completed the journey of learning how a free app makes money and how you can make money by developing a free app for your brand.
Moreover, if you don’t have the investment required to create a free app and you’re thinking of getting in touch with an investor to fund your project’s development, then below is another amazing article from where you can learn how you can find an investor for your free app.
“ THE COMPLETE GUIDE TO GETTING INVESTORS FOR YOUR MOBILE APP “
Now that we’re done with all the information, it is time to sit back, relax and let all the quintessential information sink in. Also, this is the part where I have to give a verdict right, so; I would say that apps are a fine way to earn money, and there’s certainly a lot of untapped potential in the app world that you can still capitalize on.
However, successful methodologies, innovative approaches, understanding technologies, and answering a particular problem through an ingenious solution is what will help you make a difference in the digital world, and trust me; there’s still a lot that we can do to make a better living.
Furthermore, speaking to you as Tekrevolutionaries, we tend to advocate for pivoting a business by building the highest-earning revenue models for them, incorporating that model in their app, and helping them scale their digital presence.
We believe that before getting started on making an app to earn revenue, you should have a clear vision of the following:
- What purpose will your app serve?
- How do you tend to add value to your audience?
- Who is your target audience?
- Do your app face competition?
Lastly, I want you to know that customer satisfaction and monetary gains go hand in hand so, just go through every detail of the article. I know there may be something that I might’ve missed, and to get information on those, you can simply click on the button below to get connected.
You need to execute a well-planned business strategy that would include the revenue streams of the application through which you’ll make sure that your free app starts to earn revenue.
Learn more about making a superlative mobile app business plan? Here’s your guide: “HOW TO CREATE A MOBILE APP BUSINESS PLAN? (A COMPREHENSIVE GUIDE)”
Originally published at https://www.tekrevol.com on May 3, 2021.